Video: What is Real Time Bidding?

Real time bidding or RTB is a new way to buy and sell digital advertising. Unlike traditional digital sales—where ad inventory is sold in blocks, with pre-arranged commitments—RTB creates a unique transaction for every single impression at the moment the ad is shown. In the split second between a user landing on a website and an ad loading on the page, requests packed with publisher/user data are sent to hundreds of potential buyers who can all bid on the impression. The highest bidder's ad is shown.

This RTB ecosystem opens up a huge number of possibilities and has many benefits over direct media buying:

1. Access to inventory:At this point, most online publishers make at least some of their inventory available on one of the world's major ad exchanges. Ad exchanges, like stock exchanges, allow the inventory to be traded under a pre-defined set of rules using RTB (usually a second price auction where the winning bidder pays $0.01 more than the second highest bid). Advertisers and media buyers access the exchanges via demand-side platforms (DSPs). DSPs will normally connect to many of the major exchanges thereby providing media buyers with one-stop shopping for ad inventory. Without the necessity of creating individual publisher relationships or committing to specific buys, media buyers gain quick and easy access to almost any inventory they want.

2. Real-time control: Due to the unique mechanics of RTB, true real-time control and statistics are now possible. Since ad impressions are being sold as they become available, it's possible to instantly pause a particular placement or a piece of creative that isn't performing. It's also possible to change targeting options, bid prices, and add new placements on the fly. Attribution statistics are real-time to match, and any decision available to a media buyer becomes immediately actionable. For buyers who are focused on performance, scale, and ultimately ROI, this level of control is critical.

3. Audience lists (user matching): One of the most novel targeting options made possible by RTB is the ability to target ads at specific user lists, regardless of the websites they visit. This is how it works: Marketers get a small piece of code (generated by their DSP), and place it on any webpage with a desirable audience (for example, the landing page from a search campaign). Using cookie technology, every user who visits this page is added to the list and can be anonymously identified by the DSP in the future. The media buyer then creates a campaign targeting users in the list and those users are served banners and video ads on any website they visit. In addition to this so-called first party data, there are now companies that specialize in building high-quality user lists, with purchase intent and demographic data, which can be bought and targeted via DSPs.

The RTB ecosystem has secured widespread adoption and today is the fastest growing segment in online advertising and is expected by many to become the standard method of buying and selling media online within the next five to ten years.